There is a lot of talk going around about bad credit and good credit. Some people may not even know what credit is and others may know the hard reality that bad credit can bring. Every person who is over the age of eighteen is entitled to credit. This credit can become good if you take out loans or credit cards and pay them diligently and are a decently dependable person. However, the credit score can also become equally as bad if you do not pay your loan bills on time. Alternatively, you may not have any loans or cards in your name which means that you have no credit whatsoever. Having no credit can be just as harmful as having bad credit, since it shows that you have not established yourself yet.
What is the Point of the Credit Score Scale
Many companies use your credit score to determine if you are a reliable person who knows how to handle their money. In many cases, you can not apply for a credit card without a decently good credit score. The worst part about having bad credit is the fact that most mortgage companies will not allow you to purchase a house if you have bad credit or no credit at all. In another aspect, potential employers may even bring up your credit score to determine if you are a generally responsible person.
Though many people think that this method is somewhat harsh, it actually protects companies and lenders from giving loans and credit cards to people who have a history of not paying their bills. If you are afraid that your credit score is below average, you might want to begin paying your bills on time and stop applying for loans and credit cards that you can not afford every month. Alternatively, young adults who are just starting out on the financial road may find that having no credit at all is just as harmful as having bad credit. In these cases, applying for a generic and high interest credit card will allow you to establish good credit, so long as you do not overspend on the card and use it solely to build credit.
What is the Credit Score Scale
The credit score of a particular adult can range anywhere from 300 to 850. If you have a credit score that is below 500, loan offices and mortgage companies will consider you a high-risk case and will most likely deny you services. A credit score below 500 is considered bad credit. Alternatively, a credit score that is above about 600 will enable you to apply for loans and other financial aids without much trouble. A score above 600 or 700 is considered good credit.
The Fair Issac Corporation is actually the company that keeps track of all credit scores. This particular company is often referred to as FICO and it was established in the 1950′s. It was originally established to keep track of mathematical credit that people accumulated. It was used for larger businesses to weed through potential customers and avoid unpaid bills and loans. It was created in an effort to help businesses expand and reduce money loss. For many Americans now, it means the difference between being able to purchase that new car or having to wait until you have the actual cash for it because a loan company will not accept your credit score.
Building and Checking Your Credit Score
There is a myth that has been circulating for many years that many people think is actually true. And this myth consists of the simple fact that by checking your credit score at all, you may actually hurt your credit. The truth of the matter is that you are allowed and even encouraged to check your FICO credit score on a yearly basis. In fact, there was recently a law passed in 2005 that forces credit agencies to provide one free credit report every year to their customers. If you continue to do credit checks on a regular basis, you will take off about 5 points for each inquiry. Because the credit score scale is between 300 and 850, it will take awhile for you to accumulate bad credit from inquiring about it.
If you currently have bad credit, you may find that life is just a little bit harder for you. You may have your eye on that car or beautiful house and you have tried everything in order to allow a loan office to offer you financial aid. To establish good credit, you have to make sure that you pay your bills on time. If you currently have a loan on something that you own, be sure that the payments are sent out in advance of when they’re due. If you are a college student or someone who has just turned eighteen, you may find that your financial life is equally as hard because of having no credit at all. By opening a credit card that is solely used to establish credit, you will be within the good scale in no time. Make sure that you only use this credit card for credit establishment, since many people go into debt over credit cards.
